Which UK FIntech does $3trn of business per annum and are in 7 countries? Well I guess for readers on the website the pic above is a bit of a hint. David Mercer CEO LMAX Exchange joins us today to dive into the subject of marketplaces which have been a fundamental part of culture forever and a fundamental part of Fintech as a mechanism for connecting buyer and seller more efficiently.

LMAX Exchange’s claim is that they are leading the global FX industry transformation to transparent and fair execution. Sounds good but before we get around to that we look in depth at Marketplaces per se.

Which Fintech started in a basement in Stockwell, has done over £65bn of FX business, do over 1 million transfers a year with 600 staff in 7 offices, whose chairman is a former deputy Governor of the Bank of England and according to price comparison sites offer better prices than other Fintech FX players on virtually all sizes of deal?

Worldfirst as many of you might not have guessed (though those of you reading this online will have had a huge hint in terms of the banner above 😀

Jonathan Quin their co-founder and CEO for 14yrs joins us today to discuss the art and science of international expansion – a truly vital step if UK Fintechs are ever to move beyond a potential audience of 1% of the world’s population to far far more.

In this New Year Special I’ll survey the state of the art and present a report card for each of the main Fintech sectors – P2P, Bitcoin, Blockchain, Money, App-only banks, Insuretech, Digital I.M., Regtech, Payments and a deeper dive into the leading AI of 2017. We also examine the broader context for Fintech – namely US Tech Giants who had a seismic shift in 2017.

No awards as such this year but plenty of honourable mentions and a host of goodies for those of you in search of new ideas.

Data is the new oil ‘innit. Fintechs use it by the bucketload don’t they? Incumbents are slow off the blocks aren’t they? What if a lot of this is simply not true? What if its hype and spin? What is the reality?

We are joined today by Max Pell CEO of Validis a Fintech based in London and Austin Texas who seamlessy connect data in SME end systems to your hot sexy Fintech or solidly engineered incumbent. Clients include Barclays, RBS, most of the Big4 accountants and a number of Fintechs so Max is well placed to talk about what is actually going on.

What if the world isn’t as we have been led to believe? What if the reality is that many Fintechs are focuse don being marketing machines and are not that data rich? Eg and esp in P2P. Well that hooked me as I have long felt/intuited/been winked at that all these quotes complex unqotes credit models are not actually – er – complex.

What if the reality was that in new FS and old FS organisations have actually, away from the PR froth and hype, only started putting their toes in the shallow end let alone actually swimming?

What if (as Louise Beaumont was saying in LFP087) most organisations haven’t grasped the strategic implications of data?

Can we (as Snowden and more senior ex spy-industry have argued) have too much data? Can we then start to lose the wood in the trees?

His essential insight is that “shareholder value” has become an ideology of value extraction entirely lacking a theory of value creation. In past decades Financialisation as a whole has led the US from being a “retain and reinvest economy” to a “downsize and distribute economy”.

We dive into not just the ideology of shareholder value which has turned out to damage society and help create massively increased inequality but also Bill’s theory of the Innovative Enterprise and how we might fix the broken system to produce more equitable growth. To quote wiki:

Much of his current work focuses on how the financialization of the U.S. industrial corporation, manifested in massive distributions of corporate cash to shareholders and the explosion of stock-based executive pay, results in employment instability and income inequity, while undermining the innovative capability of the U.S. economy.

Bill’s work, over nigh on five decades, has been most recently funded most recently by INET (whose Chairman Lord Turner was start of the show in LFP065). It covers three important super big-picture pillars for Fintech – innovation, solid economic growth, and how corporates (ie incumbents) have changed in recent decades. It also adds in the surely socially vital angle of inequality. No point a tiny few of you Fintechers achieving mega-wealth if in a decade or two the dispossessed start burning down your chateaux.

Much Fintech (online wealth managers qv) is just “putting lipstick on a pig” – digitising existing processes at oldskool prices. No-one can say this about CrossLend who securitise loans ~200,000 times cheaper than oldskool prices and securitise down to one single loan as small as €1,500 :-!

Furthermore oldskool securitisation has all too often been a metaphor for investment bankers taking a huge chunk of value out of a package of assets and slicing and dicing the residual into complex tranches that even bamboozle the ratings agencies. With catastrophic effects – 2008 & CDO-squareds qv.

CrossLend has grown to a team of around 45 people, based in Berlin and Luxembourg and work across Europe – Germany, Netherlands, Spain, UK, Norway, Finland.

The best post-“post crisis” banks have leaped ahead and are well on the way to leveraging Fintech to make themselves even stronger. Alexander Ball Fintech Manager at ING talks to us about a bank which has over 100 partnerships with Fintechs, the best known of which perhaps is Kabbage whereby ING clients can borrow up to €100,000 online within minutes.

All incumbents, all banks are absolutely not the same. Whilst the slowest and least well organised of the incumbents aren’t doing a great job adapting to the digital world the best organised are.

When a firm with 50,000 staff and €50bn of equity start to leverage new digital ideas and innovations doesn’t this start to leave disruptive Fintech far behind?

52% of UK SMEs based floodplains don’t have flood cover! Insurers struggle to insure flood risk due to the difficulty of modelling and assessing the economic impact. Many people/businesses are unable to get insurance cover at all. Every year, globally, there are $50bn of flood caused economic losses of which only $9bn are covered by insurance.

Into the breach (geddit?) step Floodflash formed by Adam Rimmer and Ian Bartholomew experts in modelling event risks – together with the important fixed-payout insurance concept (doesn’t need much reflection to see how good that could be) this constitutes parametric insurance.

Floodflash is an Insuretech startup with great potential. Its also an opportunity to hear from a firm in the FCA sandbox.

Parametric insurance sounds very techie but in its best known form – life insurance – has been around for centuries.

The market failure above is huge.

On this show we discuss the role of event-based, no-exclusion, instant settlement in addressing this problem. Many people/businesses simply cannot get insurance at present.

A year ago in LFP060 (currently the 2nd most downloaded episode) we covered Open Banking/PSD2 from a Regulatory perspective. In this episode Louise Beaumont argues forcefully that Reg & Tech perspectives are “necessary but not sufficient”. To do Open Banking “well” means to utterly rethink ones strategy.

Louise is the co-Chair of the Open Bank Working Group at techUK , member of the UK Govt’s Open Bank Implementation Entity and Strategic Advisor Open Bank at Publicis.Sapient and thus sees Open Banking from many sides.

She was also on the show three years ago in LFP011, she was a co-founder of Platform Black, the then number two in the UK Fintech Invoice Discounting sector so has plenty of deep background in the Fintech Revolution. Indeed LFP011 was precisely around what she saw as the 5 Key Challenges facing Fintechs growth (which seem appropriate to this day).

So with that track record behind her we can anticipate that her views on Open Banking/PSD2 will be equally relevant in several years’ time too.

So if a year ago we looked into what this is all about and where it is coming from, we can now examine where we are and critically what the key factors for success are in practice.